New York Governor Kathy Hochul recently signed into law new legislation expanding the reach of the New York False Claims Act (NYFCA) to entities that fail to file tax returns in New York. Unlike the federal False Claims Act (FCA), which expressly carves out tax-based claims, the NYFCA does the opposite—specifically permitting them—and now purports to extend to non-filers.
Proponents of the bill [1] describe it as closing a “loophole” in the preexisting NYFCA, which applied only to statements made in a filed tax return. The amended statute purports to reach companies and individuals who do not file New York tax returns at all.
The new law took effect immediately upon passage and in any pending case shall apply to any tax obligation knowingly concealed or knowingly avoided before, on, or after the effective date of May 3, 2023; provided, however, that in any action filed after May 3, 2023, the new law shall only apply to tax obligations knowingly concealed or knowingly avoided on or after May 1, 2020.
The NYFCA [2] imposes liability on any party that “knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the state or a local government.” [3] In contrast with the federal FCA, [4] the NYFCA has explicitly included tax claims since 2010, limited to defendants with taxable income or sales over $1 million in the tax year and claimed damages in excess of $350,000. [5] However,...
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